Form 8-K - Current report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

___________________________________________________________

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): August 1, 2023

_________________________

ILLINOIS TOOL WORKS INC.

(Exact name of registrant as specified in its charter)

Delaware

1-4797

36-1258310

(State or other jurisdiction of incorporation)

(Commission File No.)

(I.R.S. Employer Identification No.)

155 Harlem Avenue

Glenview

60025

(Address of principal executive offices)

(Zip Code)

Registrant's telephone number, including area code: 847-724-7500

Not Applicable

(Former name or former address, if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:


☐			Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐			Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐			Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐			Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ITW	New York Stock Exchange
0.250% Euro Notes due 2024	ITW24A	New York Stock Exchange
0.625% Euro Notes due 2027	ITW27	New York Stock Exchange
2.125% Euro Notes due 2030	ITW30	New York Stock Exchange
1.00% Euro Notes due 2031	ITW31	New York Stock Exchange
3.00% Euro Notes due 2034	ITW34	New York Stock Exchange

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition

On August 1, 2023, Illinois Tool Works Inc. (the "Company") announced its 2023 second quarter results of operations in the press release furnished as Exhibit 99.1.

Non-GAAP Financial Measures

The Company uses free cash flow to measure cash flow generated by operations that is available for dividends, share repurchases, acquisitions and debt repayment. The Company believes this non-GAAP financial measure, along with free cash flow to net income conversion rate, are useful to investors in evaluating the Company’s financial performance and measures the Company's ability to generate cash internally to fund Company initiatives. Free cash flow represents net cash provided by operating activities less additions to plant and equipment. Free cash flow is a measurement that is not the same as net cash flow from operating activities per the statement of cash flows and may not be consistent with similarly titled measures used by other companies. A reconciliation of free cash flow to net cash provided by operating activities is included in the press release furnished as Exhibit 99.1.

The Company uses after-tax return on average invested capital ("After-tax ROIC") to measure the effectiveness of its operations' use of invested capital to generate profits. After-tax ROIC is not defined under U.S. generally accepted accounting principles ("GAAP"). After-tax ROIC is a non-GAAP financial measure that the Company believes is a meaningful metric to investors in evaluating the Company's ability to generate returns from cash invested in its operations and may be different than the method used by other companies to calculate After-tax ROIC. The Company defines After-tax ROIC as operating income after taxes divided by average invested capital, which is annualized when presented in interim periods. Operating income after taxes is a non-GAAP measure consisting of net income before interest expense and other income (expense), on an after-tax basis, which are excluded as they do not represent returns generated by the Company's operations. For comparability, the Company also excluded the discrete tax benefit of $20 million in the second quarter of 2023 from net income and the effective tax rate for the three and six months ended June 30, 2023. Additionally, for comparability, the Company excluded the discrete tax benefit of $51 million in the second quarter of 2022 from net income and the effective tax rate for the three and six months ended June 30, 2022. Additionally, for comparability, the Company also excluded the discrete tax benefits of $32 million in the fourth quarter of 2022 and $51 million in the second quarter of 2022 from net income and the effective tax rate for the year ended December 31, 2022. Total invested capital represents the net assets of the Company, other than cash and equivalents and outstanding debt which do not represent capital investment in the Company's operations. The most comparable GAAP measure to operating income after taxes is net income. Calculations of net income to average invested capital and After-tax ROIC are included in the press release furnished as Exhibit 99.1.

The Company presented diluted net income per share for the three months ended June 30, 2023 and 2022 excluding the discrete tax benefits of $20 million in the second quarter of 2023 and $51 million in the second quarter of 2022, respectively, and diluted net income per share for the twelve months ended December 31, 2022 excluding the net impact of gains from two divestitures in the fourth quarter of 2022. The Company believes these non-GAAP measures enhance investors' understanding of the Company's underlying financial performance and improve comparability with other periods. A reconciliation of these non-GAAP measures to diluted net income per share is included in the press release furnished as Exhibit 99.1.

Item 9.01 Financial Statements and Exhibits


(d)	Exhibits

	Exhibit Number	Exhibit Description

	99.1	Press Release issued by Illinois Tool Works Inc. dated August 1, 2023 (furnished pursuant to Item 2.02).
	104	Cover Page Interactive Data File (embedded within the Inline XBRL document).

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



						ILLINOIS TOOL WORKS INC.


Dated: August 1, 2023						By: /s/ Michael M. Larsen
						Michael M. Larsen
						Senior Vice President & Chief Financial Officer

Exhibit 99.1

ITW Reports Second Quarter 2023 Results

•Revenue of $4.1 billion, an increase of 2% with organic growth of 3%

•Record operating income of $1.01 billion, an increase of 9%

•Operating margin of 24.8%, an increase of 170 bps

•Record GAAP EPS of $2.48, an increase of 5%; Excl. one-time tax items, EPS increased 9%

•Raising full year GAAP EPS guidance by $0.10 to a range of $9.55 to $9.95 per share

GLENVIEW, IL., August 1, 2023 - Illinois Tool Works Inc. (NYSE: ITW) today reported its second quarter 2023 results.

“The ITW team delivered another quarter of strong operational execution and financial performance. Quarterly operating income grew nine percent and exceeded $1 billion for the first time in ITW’s history, operating margin expanded 170 basis points year on year, and GAAP EPS of $2.48 was a Q2 record for the company,” said E. Scott Santi, Chairman and Chief Executive Officer. “Organic growth was three percent as resilient demand in many of ITW’s industrial end markets was partially offset by inventory reduction efforts by our end customers and channel partners in response to stabilizing supply chain performance, which we estimate to have impacted organic growth by 1 to 1.5 percent in the quarter. While customer and channel inventory normalization will continue to be a factor for the next several quarters, we expect stable underlying demand and continued strong margin and profitability performance through the balance of the year. As a result, we are raising our full-year 2023 GAAP EPS guidance by $0.10 at the mid-point.”

Second Quarter 2023 Results

Second quarter revenue of $4.1 billion increased two percent with organic revenue growth of three percent, as divestitures reduced revenue by one percent.

GAAP EPS increased five percent to $2.48 and included $0.07 of a one-time tax benefit. GAAP EPS of $2.37 in the second quarter of 2022 included a $0.16 one-time tax benefit. Excluding one-time tax items in both periods, EPS increased nine percent. Operating income grew nine percent to a record $1.01 billion. Operating margin of 24.8 percent improved 170 basis points as enterprise initiatives contributed 130 basis points. Operating cash flow was $790 million, and free cash flow was $705 million, an increase of 68 percent, with a conversion rate to net income of 94 percent. The company repurchased $375 million of its own shares and the effective tax rate was 21.4 percent.

2023 Guidance

ITW is raising its full-year GAAP EPS guidance by $0.10 to $9.55 to $9.95 per share. The company is projecting organic growth of three to five percent based on first half 2023 performance and current levels of demand. Divestitures are expected to reduce revenue by one percent resulting in total revenue growth of two to four percent. Operating margin is projected to be in the range of 24.5 to 25.5 percent, with enterprise initiatives contributing more than 100 basis points. Free cash flow is projected to be greater than 100 percent of net income and the company plans to repurchase approximately $1.5 billion of its own shares. The expected tax rate is in the range of 22.5 to 23.5 percent.

Non-GAAP Measures

This earnings release contains certain non-GAAP financial measures. A reconciliation of these measures to the most directly comparable GAAP measures is included in the attached supplemental reconciliation schedule. The estimated guidance of free cash flow conversion rate is based on assumptions that are difficult to predict, and estimated guidance for the most directly comparable GAAP measure and a reconciliation of this forward-looking estimate to its most directly comparable GAAP estimate have been omitted due to the unreasonable efforts required in connection with such a reconciliation and the lack of reliable forward-looking cash flow information.

Forward-looking Statements

This earnings release contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such statements may include, without limitation, statements regarding global supply chain challenges, expected impact of inflation including raw material inflation and rising interest rates, the impact of enterprise initiatives, future financial and operating performance, free cash flow and free cash flow conversion rate, organic and total revenue, operating and incremental margin, price/cost impact, statements regarding diluted income per share, restructuring expenses and related benefits, expected dividend payments, after-tax return on invested capital, effective tax rates, exchange rates, expected access to liquidity sources,

expected capital allocation, expected timing and amount of share repurchases, end market economic and regulatory conditions, the impact of recent or potential acquisitions and/or divestitures, and the company’s 2023 guidance. These statements are subject to certain risks, uncertainties, assumptions, and other factors that could cause actual results to differ materially from those anticipated. Such factors include those risk factors contained in ITW's Form 10-K for 2022 and subsequent reports filed with the SEC.

About Illinois Tool Works

ITW (NYSE: ITW) is a Fortune 200 global multi-industrial manufacturing leader with revenue of $15.9 billion in 2022. The company’s seven industry-leading segments leverage the unique ITW Business Model to drive solid growth with best-in-class margins and returns in markets where highly innovative, customer-focused solutions are required. ITW’s approximately 46,000 dedicated colleagues around the world thrive in the company’s decentralized and entrepreneurial culture. www.itw.com

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF INCOME (UNAUDITED)


	Three Months Ended				Six Months Ended
	June 30,				June 30,
In millions except per share amounts	2023		2022		2023		2022
Operating Revenue	$	4,074	$	4,011	$	8,093	$	7,950
Cost of revenue	2,344		2,392		4,685		4,749
Selling, administrative, and research and development expenses	690		659		1,365		1,311
Amortization and impairment of intangible assets	30		34		61		69
Operating Income	1,010		926		1,982		1,821
Interest expense	(69)		(47)		(129)		(95)
Other income (expense)	20		24		30		38
Income Before Taxes	961		903		1,883		1,764
Income taxes	207		165		415		364
Net Income	$	754	$	738	$	1,468	$	1,400

Net Income Per Share:
Basic	$	2.49	$	2.37	$	4.83	$	4.49
Diluted	$	2.48	$	2.37	$	4.81	$	4.48

Cash Dividends Per Share:
Paid	$	1.31	$	1.22	$	2.62	$	2.44
Declared	$	1.31	$	1.22	$	2.62	$	2.44

Shares of Common Stock Outstanding During the Period:
Average	303.3		310.6		304.1		311.5
Average assuming dilution	304.2		311.5		305.2		312.6

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

STATEMENT OF FINANCIAL POSITION (UNAUDITED)


In millions	June 30, 2023		December 31, 2022
Assets
Current Assets:
Cash and equivalents	$	922	$	708
Trade receivables	3,216		3,171
Inventories	1,921		2,054
Prepaid expenses and other current assets	345		329
Assets held for sale	—		8
Total current assets	6,404		6,270

Net plant and equipment	1,901		1,848
Goodwill	4,887		4,864
Intangible assets	708		768
Deferred income taxes	500		494
Other assets	1,252		1,178
	$	15,652	$	15,422

Liabilities and Stockholders' Equity
Current Liabilities:
Short-term debt	$	1,275	$	1,590
Accounts payable	590		594
Accrued expenses	1,625		1,728
Cash dividends payable	396		400
Income taxes payable	154		147
Liabilities held for sale	—		1
Total current liabilities	4,040		4,460

Noncurrent Liabilities:
Long-term debt	6,947		6,173
Deferred income taxes	451		484
Noncurrent income taxes payable	151		273
Other liabilities	969		943
Total noncurrent liabilities	8,518		7,873

Stockholders' Equity:
Common stock	6		6
Additional paid-in-capital	1,550		1,501
Retained earnings	26,473		25,799
Common stock held in treasury	(23,116)		(22,377)
Accumulated other comprehensive income (loss)	(1,820)		(1,841)
Noncontrolling interest	1		1
Total stockholders' equity	3,094		3,089
	$	15,652	$	15,422

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA (UNAUDITED)


Three Months Ended June 30, 2023
Dollars in millions	Total Revenue		Operating Income		Operating Margin
Automotive OEM	$	826	$	139	16.8	%
Food Equipment	654		182		27.8	%
Test & Measurement and Electronics	700		162		23.2	%
Welding	490		167		33.9	%
Polymers & Fluids	459		119		25.9	%
Construction Products	526		154		29.3	%
Specialty Products	423		109		26.0	%
Intersegment	(4)		—		—	%
Total Segments	4,074		1,032		25.3	%
Unallocated	—		(22)		—	%
Total Company	$	4,074	$	1,010	24.8	%


Six Months Ended June 30, 2023
Dollars in millions	Total Revenue		Operating Income		Operating Margin
Automotive OEM	$	1,622	$	267	16.4	%
Food Equipment	1,289		351		27.2	%
Test & Measurement and Electronics	1,403		334		23.8	%
Welding	983		324		32.9	%
Polymers & Fluids	906		228		25.2	%
Construction Products	1,052		299		28.4	%
Specialty Products	846		218		25.8	%
Intersegment	(8)		—		—	%
Total Segments	8,093		2,021		25.0	%
Unallocated	—		(39)		—	%
Total Company	$	8,093	$	1,982	24.5	%

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA (UNAUDITED)


Q2 2023 vs. Q2 2022 Favorable/(Unfavorable)
Operating Revenue	Automotive OEM		Food Equipment		Test & Measurement and Electronics		Welding		Polymers & Fluids		Construction Products		Specialty Products		Total ITW
Organic	16.3	%	6.9	%	1.1	%	0.7	%	(0.5)	%	(5.7)	%	(3.6)	%	3.0	%
Acquisitions/ Divestitures	—	%	(1.0)	%	—	%	—	%	(5.7)	%	—	%	(2.3)	%	(1.1)	%
Translation	(0.1)	%	0.4	%	(0.4)	%	—	%	(1.4)	%	(1.1)	%	0.5	%	(0.3)	%
Operating Revenue	16.2	%	6.3	%	0.7	%	0.7	%	(7.6)	%	(6.8)	%	(5.4)	%	1.6	%

Q2 2023 vs. Q2 2022 Favorable/(Unfavorable)

Change in Operating Margin

Automotive OEM

Food Equipment

Test & Measurement and Electronics

Welding

Polymers & Fluids

Construction Products

Specialty Products

Total ITW

Operating Leverage

320 bps

140 bps

30 bps

(10) bps

(90) bps

(80) bps

60 bps

Changes in Variable Margin & OH Costs

(210) bps

140 bps

70 bps

460 bps

150 bps

320 bps

20 bps

100 bps

Total Organic

110 bps

280 bps

100 bps

460 bps

140 bps

230 bps

(60) bps

160 bps

Acquisitions/
Divestitures

—

30 bps

—

30 bps

—

60 bps

10 bps

Restructuring/Other

140 bps

—

(30) bps

—

(90) bps

(60) bps

(90) bps

—

Total Operating Margin Change

250 bps

310 bps

70 bps

460 bps

80 bps

170 bps

(90) bps

170 bps

Total Operating Margin % *

16.8%

27.8%

23.2%

33.9%

25.9%

29.3%

26.0%

24.8%

* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets

30 bps

50 bps

170 bps

10 bps

180 bps

10 bps

60 bps

70 bps **

** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.07) on GAAP earnings per share for the second quarter of 2023.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

SEGMENT DATA (UNAUDITED)


H1 2023 vs. H2 2022 Favorable/(Unfavorable)
Operating Revenue	Automotive OEM		Food Equipment		Test & Measurement and Electronics		Welding		Polymers & Fluids		Construction Products		Specialty Products		Total ITW
Organic	11.9	%	11.3	%	3.3	%	5.3	%	(0.3)	%	(3.6)	%	(4.3)	%	4.1	%
Acquisitions/ Divestitures	—	%	(1.1)	%	—	%	—	%	(5.1)	%	—	%	(1.1)	%	(0.9)	%
Translation	(1.6)	%	(1.0)	%	(1.7)	%	(0.3)	%	(1.9)	%	(2.1)	%	(0.5)	%	(1.4)	%
Operating Revenue	10.3	%	9.2	%	1.6	%	5.0	%	(7.3)	%	(5.7)	%	(5.9)	%	1.8	%

H1 2023 vs. H2 2022 Favorable/(Unfavorable)

Change in Operating Margin

Automotive OEM

Food Equipment

Test & Measurement and Electronics

Welding

Polymers & Fluids

Construction Products

Specialty Products

Total ITW

Operating Leverage

230 bps

210 bps

80 bps

(10) bps

(60) bps

(90) bps

90 bps

Changes in Variable Margin & OH Costs

(330) bps

140 bps

100 bps

210 bps

80 bps

310 bps

—

60 bps

Total Organic

(100) bps

350 bps

180 bps

290 bps

70 bps

250 bps

(90) bps

150 bps

Acquisitions/
Divestitures

—

20 bps

—

30 bps

—

30 bps

10 bps

Restructuring/Other

110 bps

(10) bps

(20) bps

—

(60) bps

(30) bps

(40) bps

—

Total Operating Margin Change

10 bps

360 bps

160 bps

290 bps

40 bps

220 bps

(100) bps

160 bps

Total Operating Margin % *

16.4%

27.2%

23.8%

32.9%

25.2%

28.4%

25.8%

24.5%

* Includes unfavorable operating margin impact of amortization expense from acquisition-related intangible assets

30 bps

50 bps

180 bps

10 bps

190 bps

10 bps

60 bps

80 bps **

** Amortization expense from acquisition-related intangible assets had an unfavorable impact of ($0.15) on GAAP earnings per share for the first half 2023.

ILLINOIS TOOL WORKS INC. and SUBSIDIARIES

GAAP to NON-GAAP RECONCILIATIONS (UNAUDITED)

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Dollars in millions	2023			2022			2023			2022
Numerator:
Net income	$	754		$	738		$	1,468		$	1,400
Discrete tax benefit related to the second quarter 2023	(20)			—			(20)			—
Discrete tax benefit related to the second quarter 2022	—			(51)			—			(51)
Interest expense, net of tax (1)	53			36			99			73
Other (income) expense, net of tax (1)	(15)			(18)			(23)			(29)
Operating income after taxes	$	772		$	705		$	1,524		$	1,393

Denominator:
Invested capital:
Cash and equivalents	$	922		$	879		$	922		$	879
Trade receivables	3,216			3,109			3,216			3,109
Inventories	1,921			1,975			1,921			1,975
Net assets held for sale	—			73			—			73
Net plant and equipment	1,901			1,736			1,901			1,736
Goodwill and intangible assets	5,595			5,702			5,595			5,702
Accounts payable and accrued expenses	(2,215)			(2,241)			(2,215)			(2,241)
Debt	(8,222)			(7,640)			(8,222)			(7,640)
Other, net	(24)			(214)			(24)			(214)
Total net assets (stockholders' equity)	3,094			3,379			3,094			3,379
Cash and equivalents	(922)			(879)			(922)			(879)
Debt	8,222			7,640			8,222			7,640
Total invested capital	$	10,394		$	10,140		$	10,394		$	10,140

Average invested capital (2)	$	10,366		$	10,143		$	10,292		$	10,024

Net income to average invested capital (3)	29.1		%	29.1		%	28.5		%	27.9		%
After-tax return on average invested capital (3)	29.8		%	27.8		%	29.6		%	27.8		%

(1) Effective tax rate used for interest expense and other (income) expense for the three months ended June 30, 2023 and 2022 was 23.6% and 23.9%, respectively. Effective tax rate used for interest expense and other (income) expense for the six months ended June 30, 2023 and 2022 was 23.1% and 23.5%, respectively.

(2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within each of the periods presented.

(3) Returns for the three months ended June 30, 2023 and 2022 were converted to an annual rate by multiplying the calculated return by 4. Returns for the six months ended June 30, 2023 and 2022 were converted to an annual rate by multiplying the calculated return by 2.

A reconciliation of the tax rate for the three and six months ended June 30, 2023, excluding the second quarter 2023 discrete tax benefit of $20 million related to amended 2021 U.S. taxes, is as follows:


	Three Months Ended				Six Months Ended
	June 30, 2023				June 30, 2023
Dollars in millions	Income Taxes		Tax Rate		Income Taxes		Tax Rate
As reported	$	207	21.4	%	$	415	22.0	%
Discrete tax benefit related to the second quarter 2023	20		2.2	%	20		1.1	%
As adjusted	$	227	23.6	%	$	435	23.1	%

A reconciliation of the tax rate for the three and six months ended June 30, 2022, excluding the second quarter 2022 discrete tax benefit of $51 million related to the resolution of a U.S. tax audit, is as follows:


	Three Months Ended				Six Months Ended
	June 30, 2022				June 30, 2022
Dollars in millions	Income Taxes		Tax Rate		Income Taxes		Tax Rate
As reported	$	165	18.3	%	$	364	20.7	%
Discrete tax benefit related to the second quarter 2022	51		5.6	%	51		2.8	%
As adjusted	$	216	23.9	%	$	415	23.5	%

AFTER-TAX RETURN ON AVERAGE INVESTED CAPITAL (UNAUDITED)


	Twelve Months Ended
Dollars in millions	December 31, 2022
Numerator:
Net income	$	3,034
Discrete tax benefit related to the fourth quarter 2022	(32)
Discrete tax benefit related to the second quarter 2022	(51)
Interest expense, net of tax (1)	156
Other (income) expense, net of tax (1)	(196)
Operating income after taxes	$	2,911

Denominator:
Invested capital:
Cash and equivalents	$	708
Trade receivables	3,171
Inventories	2,054
Net assets held for sale	7
Net plant and equipment	1,848
Goodwill and intangible assets	5,632
Accounts payable and accrued expenses	(2,322)
Debt	(7,763)
Other, net	(246)
Total net assets (stockholders' equity)	3,089
Cash and equivalents	(708)
Debt	7,763
Total invested capital	$	10,144

Average invested capital (2)	$	10,017

Net income to average invested capital	30.3		%
After-tax return on average invested capital	29.1		%

(1) Effective tax rate used for interest expense and other (income) expense for the year ended December 31, 2022 was 23.2%.

(2) Average invested capital is calculated using the total invested capital balances at the start of the period and at the end of each quarter within the period presented.

A reconciliation of the 2022 effective tax rate excluding the fourth quarter 2022 discrete tax benefit of $32 million related to the utilization of capital loss carryforwards and the second quarter 2022 discrete tax benefit of $51 million related to the resolution of a U.S. tax audit is as follows:


	Twelve Months Ended
	December 31, 2022
Dollars in millions	Income Taxes		Tax Rate
As reported	$	808	21.0	%
Discrete tax benefit related to the fourth quarter 2022	32		0.8	%
Discrete tax benefit related to the second quarter 2022	51		1.4	%
As adjusted	$	891	23.2	%

FREE CASH FLOW (UNAUDITED)


	Three Months Ended						Six Months Ended
	June 30,						June 30,
Dollars in millions	2023			2022			2023			2022
Net cash provided by operating activities	$	790		$	501		$	1,518		$	824
Less: Additions to plant and equipment	(85)			(81)			(198)			(155)
Free cash flow	$	705		$	420		$	1,320		$	669

Net income	$	754		$	738		$	1,468		$	1,400

Net cash provided by operating activities to net income conversion rate	105		%	68		%	103		%	59		%
Free cash flow to net income conversion rate	94		%	57		%	90		%	48		%

ADJUSTED NET INCOME PER SHARE - DILUTED (UNAUDITED)


	Three Months Ended
	June 30,
	2023		2022
As reported	$	2.48	$	2.37
Discrete tax benefit related to the second quarter 2023	(0.07)		—
Discrete tax benefit related to the second quarter 2022	—		(0.16)
As adjusted	$	2.41	$	2.21


	Twelve Months Ended
	December 31, 2022
As reported	$	9.77
Net impact of gains from two divestitures in the fourth quarter 2022	(0.60)
As adjusted	$	9.17

Document and Entity Information Document	Aug. 01, 2023
Entity Information [Line Items]
Document Type	8-K
Document Period End Date	Aug. 01, 2023
Entity Registrant Name	ILLINOIS TOOL WORKS INC.
Entity Incorporation, State or Country Code	DE
Entity File Number	1-4797
Entity Tax Identification Number	36-1258310
Entity Address, Address Line One	155 Harlem Avenue
Entity Address, City or Town	Glenview
Entity Address, State or Province	IL
Entity Address, Postal Zip Code	60025
City Area Code	847
Local Phone Number	724-7500
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Entity Central Index Key	0000049826
Amendment Flag	false
NEW YORK STOCK EXCHANGE, INC. \| Common Stock
Entity Information [Line Items]
Title of 12(b) Security	Common Stock
Trading Symbol	ITW
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. \| 0.250% Euro Notes due 2024
Entity Information [Line Items]
Title of 12(b) Security	0.250% Euro Notes due 2024
Trading Symbol	ITW24A
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. \| 0.625% Euro Notes due 2027
Entity Information [Line Items]
Title of 12(b) Security	0.625% Euro Notes due 2027
Trading Symbol	ITW27
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. \| 2.125% Euro Notes due 2030
Entity Information [Line Items]
Title of 12(b) Security	2.125% Euro Notes due 2030
Trading Symbol	ITW30
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. \| 1.00% Euro Notes due 2031
Entity Information [Line Items]
Title of 12(b) Security	1.00% Euro Notes due 2031
Trading Symbol	ITW31
Security Exchange Name	NYSE
NEW YORK STOCK EXCHANGE, INC. \| 3.00% Euro Notes due 2034
Entity Information [Line Items]
Title of 12(b) Security	3.00% Euro Notes due 2034
Trading Symbol	ITW34
Security Exchange Name	NYSE